The Visiting Nurse Association of Rhode Island and Home & Hospice of Rhode Island are taking formal steps this month to pull out of the Lifespan health system – two years after Lifespan announced plans to shed the agencies from its network.
Lifespan in December 2000 said it would drop those providers as part of its plan to focus more closely on acute-care hospitals and academic medicine. But the breakup has been on hold while Lifespan works through disaffiliation agreements with each agency.
Now Lifespan and the affiliates finally appear headed for an official parting of ways. VNA-RI last month filed with the state Health Department an application to disaffiliate from Lifespan, which would become effective Dec. 31, pending the approval of health regulators.
In the case of Home & Hospice Care, the Health Department has questioned whether the nonprofit group could survive financially without Lifespan’s support. And regulators have expressed concern that the $2.2 million the hospice group would have been obligated to pay Lifespan as part of a proposed breakup agreement would cripple the agency, which – like many home-care agencies – is operating in the red.
The Health Department’s concerns were aired late last year in a committee report to the Health Services Council, which reviews any changes in the ownership of licensed health-care providers.
“The flavor of the committee’s message at the time was, ‘can’t you get a better deal (from Lifespan)?’” said John X. Donahue, the Health Department’s chief of health systems development. Although the committee ultimately recommended approval of the plan, Home & Hospice Care decided to pull the application and go back to the bargaining table with Lifespan.
But now the two sides are nearing an agreement, and Home & Hospice Care plans to resubmit its proposal to both the Attorney General’s office and the Health Department in coming weeks, according to Jeffrey Chase-Lubitz, chairman of Home & Hospice Care’s board of trustees.
“I think it’s a better deal for everyone,” Chase-Lubitz said, though he declined to discuss details of the proposal before it’s filed with the state. “People may argue the differences (between the previous terms and the new ones), but I think it will be significant to the Home & Hospice Care bottom line.”
Under the original disaffiliation agreement, Home & Hospice Care would have paid $2.2 million to Lifespan (negotiated down from nearly $4 million) over a five-year period, in order to pay back corporate services the agency received from Lifespan between 1996 and 2001.
Meanwhile, VNA-RI has spent the past year ironing out its recently filed disaffiliation agreement with Lifespan, after spending much of 2001 restructuring the agency’s business plan, according to Julie Duffy, chairwoman of VNA-RI’s board of trustees.
“For a variety of reasons, none of them very notable, it took until about October to finalize these terms and conditions to everyone’s satisfaction,” Duffy said. “But during the course of this year, we’ve been able to separate ourselves operationally from Lifespan.”
Indeed, officials from both VNA-RI and Home & Hospice Care say they now are operating more or less independently despite remaining financially tied to Lifespan.
According to the VNA-RI’s application to the Health Department, it owes Lifespan more than $30 million for services provided by Lifespan and its affiliates to VNA-RI over a four-year period. Donahue of the Health Department said he would like the department to begin its review of VNA-RI’s application by the end of the December, with a final ruling coming within 90 days of the start of that review.
Jane Bruno, spokeswoman for Lifespan, confirmed that the health system has completed its disaffiliation agreement with VNA-RI and is working to finalize terms and conditions with Home & Hospice Care.
Lifespan brought both organizations into its fold in 1996. At the time, health-care providers were consolidating in order to provide a broad range of medical services in anticipation of a “capitated” reimbursement model, in which an HMO pays a fixed amount to provide the full spectrum of an individual’s medical care.
But by 2000, capitation had not materialized, and Lifespan officials said it no longer made sense for the system to hang onto its struggling home-care agencies.
The environment for home-care providers remains difficult, administrators say, because Medicare and Medicaid payments fall short of the cost to provide care. But each agency maintains that its fiscal picture is improving – partly because each has been able to tailor operations as small, specialty caregivers, rather than part of a large health network.
Analee Wulfkuhle, president and chief executive officer of Home & Hospice Care, the state’s largest hospice agency, said the organization has upgraded its information system and specialized administrative functions such as human resources and fund-raising since the decision to leave Lifespan.
“A few tiny threads are still connected, but in essence we’ve been functioning independently, and we still have a good relationship with Lifespan’s physicians and hospitals,” Wulfkuhle said.
Home & Hospice Care trimmed its operational losses from nearly $1.9 million in 2001 to about $900,000 in projected losses for fiscal year 2002, Wulfkuhle said. It has 169 employees serving about 1,600 patients.
The century-old VNA-RI had about 200 employees at the end of 2001, after laying off about 40 percent of its staff in a June 2001 restructuring.
The system made 124,000 home visits in fiscal 2001, generating revenues of $15.4 million, according to Lifespan’s annual report.
Duffy said VNA-RI’s financial performance improved during fiscal year 2002 and should continue to mend in 2003.
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